A savings exchange

Sometimes the difference between saving and wasting money comes down to a little discipline.

Spending for basic supplies and pharmaceuticals was becoming unruly at BJC HealthCare, St. Louis.

The sprawling 13-hospital, $2.6 billion health care network relied on an aging "green screen" mainframe computer application to manage its supply purchases. Ideally, the network would enjoy millions of dollars in volume discounts each year from savings formalized in the contracts BJC negotiated with its suppliers.

But hospital buyers found the old computer application so cumbersome to use, they often bypassed standard purchasing procedures and didn't take the time to look up discount prices or enter proper product numbers.

"We made it hard for them to do the right thing," says Nancy LeMaster, vice president of material services for BJC HealthCare, St. Louis.

Realizing it was leaving money on the purchasing table, BJC looked for ways to make "the right thing" easy to do.

Eventually, the hospital connected with Global Health Exchange (GHX), an electronic trading exchange company based in Westminster, Colo. The company provides easy-to-use screens for buyers and a central electronic data interface (EDI) connection with a host of suppliers, both of which help to ensure that BJC paid contract prices whenever possible for the $521 million worth of supplies it purchased last year.

"My philosophy going forward is compliance via convenience-we want to make it so easy to do the right thing that buyers don't want to order off contract," LeMaster says. The result of discipline has been dramatic; and these and other innovations helped BJC save about $18 million in 2004.

Errors be gone

Before BJC moved to the electronic exchange, a commercial service from Global Health Exchange (GHX), Westminster, Colo., more than 50 percent of its orders were so-called specialty items or products ordered without a standard item number. This meant that besides paying nondiscounted invoice prices, the hospital also failed to capture important purchasing history data that could help it better understand buying patterns that could inform future contract negotiations. Errors also arose when buyers had to manually enter product descriptions.

When BJC decided to act...